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Drawbacks of open banking

While open banking offers numerous benefits, it also comes with certain drawbacks and challenges that need to be considered.

Here are some of the drawbacks of open banking​

Multitude of APIs​

While Open Banking defines a standard way to connect to a bank or financial service, it is just that: a defined standard. The APIs to connect to the bank or financial service is not standardized and can be in various shapes and forms.

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To address this problem Fliqa provides a single unified API to access a wide range of banks and financial services.

See list of supported banks here.

Data Privacy Concerns​

  • Risk of Data Breaches: Sharing financial data with third-party providers increases the potential for data breaches and unauthorized access if not adequately protected.
  • Data Misuse: There is a risk that third parties may misuse customer data for marketing or other purposes without consent.

Security Risks​

  • Cybersecurity Threats: With more access points through APIs, the financial industry becomes more susceptible to cyberattacks and fraud.
  • Authentication Challenges: Ensuring strong customer authentication and authorization mechanisms is crucial to prevent unauthorized access.

Customer Confusion / Customer Trust​

  • Complexity: The concept of open banking can be confusing for some customers, and they may not fully understand how their data is being shared or used.
  • Consent Management: Managing consent for data sharing across multiple apps and services can be cumbersome for customers.
  • Trust Issues: Concerns about data privacy and security can erode customer trust in the financial system, especially if there are high-profile data breaches or misuse cases.

Market Fragmentation​

With numerous fintech companies and banks participating in open banking, it can lead to a fragmented financial ecosystem, making it harder for customers to choose the right services.

Regulatory Compliance​

  • Regulatory Complexity: Adhering to open banking regulations and ensuring compliance can be complex and costly for both financial institutions and third-party providers.
  • Data Localization: In some regions, regulations may require customer data to be stored within the country, posing challenges for international data sharing.
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Fliqa's takes care of all necessary regulatory and compliance issues.

Service Disruptions​

Dependence on APIs and digital services can result in service disruptions or outages, impacting customer access to financial services.

Implementation Costs​

  • Costs: Implementing open banking infrastructure and maintaining APIs can be costly for financial institutions.
  • Fintech Viability: Smaller fintech companies may struggle to compete with larger banks in terms of resources and customer reach.
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Fliqa's aim is to solve this problem by providing a unified way to access a multitude of banks and financial services through a single API or even simpler with a customer facing dialog integration.